The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
For the June 18 Market Call, I wrote, "Let's look at
Microsoft, MSFT MSFT has been trading in a range of between 76 and 83 for the past 8
weeks. Can MSFT break out of this trading range? Which way will it break? One way to play
a stock that has been in a range is to place orders above and below the trading range. If
MSFT breaks above 83 tomorrow, I would buy the breakout and place a stop in the middle of
the range. An order would be "Buy MSFT 83 � Buy Stop."
If MSFT breaks and I Buy the stock, my expectation would be a
continued rise and a new up trend start in effect. As always, use stops on al trades. I
would place my stop at 80."
Let's look at exit strategies using MSFT as our example.
MSFT broke the 83 and ran up to 89 on June 21. Since the high of
June 21, MSFT retraced part of the breakout and may have found support at 85 today. Once a
trade is profitable, the question should turn to "Focus on the Exit".
Late yesterday, the MACD indicator flashed a Sell signal. Today,
the Moving Average crossover method flashed a Sell signal. If you used either of these as
an exit point, you locked in the profit.
If you are still in the stock, I would definitely exit MSFT if it
breaks below 85 tomorrow. An aggressive trader may want to consider a Short position on an
entry below 85. If a Short were entered in the 85 area, I would place a stop at 87.
